The tax office is in the process of reviewing a number of cases where it appears taxpayers are inappropriately using their superannuation funds to minimise or avoid paying tax.
Late last week, the ATO issued a taxpayer alert indicating it is reviewing arrangements where individuals divert their personal services income to an SMSF to minimise or avoid tax.
The arrangements under review are typically used by SMSF members at or approaching retirement age as income received by the SMSF trustee is concessionally taxed or treated as exempt current pension income of an SMSF in pension phase.
“In other words, the SMSF member purportedly avoids paying tax on their income at the marginal tax rate,” said deputy commissioner James O’Halloran.
“Under these arrangements an individual performs services for a client for which the individual does not directly receive adequate remuneration for the service provided. Instead the client refers remuneration for the service to a company, trust or other non-individual entity. The entity then distributes the income to an SMSF, of which the individual is a member, as a return on investment,” Mr O’Halloran said.
The ATO are currently undertaking reviews of a number of cases involving arrangements of this type and will be engaging with taxpayers whose affairs concern them over the coming months.
The director of Consumer Affairs Victoria has accepted an enforceable undertaking from a property investment company that made false claims related to investing in a superannuation fund.
Earlier this month, Consumer Affairs announced that it had accepted an enforceable undertaking from Melbourne-based Accrue Property.
Consumer Affairs found that Accrue made several false or misleading statements on its website.
One of these claims was that the company could show investors how to use their super funds to “earn an outstanding return, regardless of market conditions or whether capital growth occurs”.
It also claimed the Accrue Landbanking system could turn an investor’s super fund into a “goldmine – to purchase an appreciating asset, without taking a cent out of your own pocket”.
Accrue must now advise current or prospective customers that “no return is ever guaranteed” in relation to investing in property and investing through an
The company has also agreed to remove all false or misleading claims from its website and to submit to a two-year compliance program to ensure all company statements comply with Australian Consumer Law.
Accrue has also agreed to pay $5,000 to the Victorian Consumer Law Fund.
Comment: $5,000 ? They would have made more than that one single property deal. If it has been a financial planning firm they would have been hung out to dry
According to statistics released by the ATO on 17 December 2014, the number of self-managed super funds (SMSFs) has increased by 29% to 534,000 in 5 years and with total assets growing to $557bn. The statistics are featured in the ATO’s report entitled, Self-Managed Superannuation Funds: A Statistical Overview 2012-13.
“SMSFs account for 99 per cent of the total number of superannuation funds and 30 per cent of the $1.9 trillion total super assets in Australia,” Assistant Commissioner Matthew Bambrick said.
In 2012-13 SMSFs experienced a positive return on assets of 10.5 per cent, the highest over five years and the fourth consecutive year of positive returns.
It showed that over 5 years to 2012-13, contributions to SMSFs averaged $24.9bn a year on behalf of 64% of SMSF members. Notably, member contributions increased by 5% and exceeded employer contributions by approximately 3 to 1 in 2013. The ATO also reported that it continues to see the proportion of SMSFs with borrowings increase from 1.5% in 2009 to 5% in 2013. At June 2013, SMSF borrowings were equivalent to 1.9% of total SMSF assets. The next publication, based on data for the 2013-14 financial year, is anticipated to be released in December 2015.